Ministry of Corporate Affairs
IBBI notifies Regulations for Insolvency Resolution and Bankruptcy Proceedings of Personal Guarantors to Corporate Debtors
Following the notification by the Central Government on 15th November, relating to proceedings of Personal Debtors to Corporate Debtors, the Insolvency and Bankruptcy Board of India  today notified Regulations for Insolvency Resolution and Bankruptcy Proceedings of Personal Guarantors to Corporate Debtors.
The following Regulations for Insolvency Resolution and Bankruptcy Proceedings of Personal Guarantors to Corporate Debtors were notified:
- the Insolvency and Bankruptcy Board of India  Regulations, 2019, specifying the details of the insolvency resolution process for personal guarantors to CDs, inter-alia, including:
- eligibility to act as a resolution professional for an insolvency resolution process;
- manner of receipt and verification of claims of creditors;
- manner of preparation of list of creditors, holding the meetings of the creditors and voting in the meeting;
- contents of the repayment plan; and
- procedure of filing of application for issuance of discharge order, etc.
- the Insolvency and Bankruptcy Board of India  Regulations, 2019 specifying the details of the bankruptcy process for personal guarantors to CDs, inter-alia, including:
- eligibility to act as a bankruptcy trustee for the bankruptcy process;
- manner of preparation of reports and timeline for submission by the bankruptcy trustee;
- manner of collating claims and formation of committee of creditors, holding meetings of the committee and voting in the meeting; and
- manner of realisation of assets of the bankrupt and its distribution, etc.
The Insolvency & Bankruptcy Code, 2016,  classifies individuals into three classes, namely, personal guarantors to CDs, partnership firms and proprietorship firms, and other individuals, to enable implementation of individual insolvency in a phased manner. The Central Government, vide a notification dated 15th November, 2019, appointed 1st December, 2019 as the date for commencement of the provisions of the Code relating to personal guarantors to CDs. It also notified the following on the same day-
- the Insolvency and Bankruptcy  Rules, 2019; and
- the Insolvency and Bankruptcy  Rules, 2019.
These Rules provide for the process and forms of making applications for initiating insolvency resolution and bankruptcy proceedings against personal guarantors to CDs, withdrawal of such applications, forms for public notice for inviting claims from the creditors, etc.
The IBC envisages reorganisation and insolvency resolution of corporate persons, partnership firms and individuals in a time bound manner for maximisation of value of assets of such persons, to promote entrepreneurship, availability of credit and balance the interests of all stakeholders. The provisions of the IBC relating to corporate processes  have since been operationalised.
There are occasions when a corporate debtor  takes a loan guaranteed by another corporate person  or an individual . The lender may pursue a remedy against the guarantor or the CD, being principal borrower, when there is a default in repayment of the loan. The insolvency resolution of corporate guarantors to the CD and of personal guarantors to the CD complement insolvency resolution of the CD. Accordingly, the IBC provides that where an application for insolvency resolution or liquidation proceeding of a CD is pending before a National Company Law Tribunal , an application relating to insolvency resolution or liquidation or bankruptcy of a corporate guarantor or a personal guarantor shall be filed before the NCLT. It further provides that insolvency resolution, liquidation or bankruptcy proceeding of a corporate guarantor or a personal guarantor of the CD pending in any court or tribunal shall stand transferred to the NCLT dealing with insolvency resolution or liquidation proceeding of such CD.
These Regulations will come into force on 1st December, 2019. They are available at www.mca.gov.in and www.ibbi.gov.in.